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MO N T H L Y R E V I E W
of Financial and Business Conditions

F ifth

Reserve

Federal

D ist r ic t

Federal Reserve Bank, Richmond 13, Va.
F greatest concern on the industrial front in May was
the nearness to which production came to complete
stoppage as a result of the coal strike. Reports from firms
over the Fifth District show that considerable slackening
in output was effected in the month and that close to com­
plete stoppage would have occurred within a two-week
period if coal production had not been resumed. Most in­
dustries, however, have not found it difficult to resume pro­
duction at levels prevailing early in the month, but produc­
tion is likely to drop rapidly and quickly if the strike is
resumed.
Another development that is causing considerable in­
terest and of greater long run economic consequence than
the coal strike adversity, is the accelerated integration in
the cotton textile industry. Mergers and outright pur­
chases of mill properties in the Carolinas have run to a
sizeable proportion of the total looms and spindles since
last summer, and while the motivating force for these in­
tegrations at the present time is for purposes of obtaining
supplies, their long run effects cannot be overlooked. Under
the assumption that the integration process would continue
until a large part of the industry was so covered, it would
first be expected that the supply of cotton textiles would
tend to adjust more closely to market demand in the future
than had been the case heretofore. This would probably
mean much smaller changes in textile prices in good and
bad times in the future than in the past, and an amplifica­
tion in the rise and fall in employment levels. It should
be expected, however, that there would be an improvement
in the quality of fabrics and a greater amount of research
expended in developing new products.
The volume of building initiated in April as measured

O

May 31, 1946
by permits fell notably from the March level, but it still
exceeded last year’s level by a wide margin. April per­
mits were adversely affected by the Federal Government
ban on commercial construction and restrictions on other
types of construction. March levels were also inordinately
raised by anticipated restrictions and many projects were
started earlier than may otherwise have been the case.
The construction potential volume bulks large in most
areas of the District, and is being raised almost daily by
a veritable flood of proposed new industrial developments
or expansions. Industrial development and expansion at
this time will further augment the needs for residences
and commercial properties, because of expanded employ­
ment levels.
The agricultural season has thus far progressed satis­
factorily for such crops as are planted. The early part
of May, however, was too wet for planting and much of
the corn crop remains to be planted. Tobacco plants had
been mainly transplanted in the Border belt by the first
of May despite shortages of plants here and there as a
result of blue mold. Transplanting in other belts will
probably be completed by the end of the month, weather
permitting. According to May 1st planting intentions as
surveyed by the New York Journal of Commerce the area
planted to cotton in the Fifth District will total 1,646,000
acres, which is 107,000 acres higher than a year ago, but
72,000 acres smaller than a month earlier. A dearth of
labor and shortages of fertilizer are indicated to be respon­
sible for lowered acreage intentions during April and ap­
pear to be more impelling than the attractive price of cot­
ton. If the reported 50,000 migrant farm worker force
now moving into South Carolina holds intact, the seasonal

BUSINESS IN D E X E S — F IF T H F E D E R A L R E SE R V E D IS T R IC T
Average Daily 1935-39=100
Seasonally Adjusted
Apr.
1946
Bank Debits ...............................
Bituminous Coal Production*...
Building Contracts Awarded....
Building Permits Issued............
Cotton Consumption* ................
Department Store Sales............
Department Store Stocks........
Furniture Sales— Retail ..........
Life Insurance Sales..................
Wholesale Trade— Four Lines.

*Not seasonally adjusted



244
365
170
138
276
217
237
283
219

Mar.
1946
254
154
328
304
139
294
206r
255
244
225

Feb.
1946
250
148
260
215
137
283
201 r
218r
221
239

Apr.
1945
210
139
169
74
140
210
196
151
159r
176

% Change
Apr. 1946 from
Mar. 1946
Apr. 45
— 4

+ 16

+11
—44
— 1
— 6
+ 5
— 7
+ 16
— 3

+116
+130
—
1
+ 31
+ 11
+ 57
+ 78
+ 24

MONTHLY REVIEW

2

labor requirements in the fruit and vegetable areas will
probably be met satisfactorily.
Total employment levels have shown little change since
the turn of the year, but this level has been somewhat ob­
scured by work stoppages direct and indirect in various
areas. Through this period, however, the cotton textile
industry has been moderately successful in raising em­
ployment levels, but it is still far below requirements. Many
concerns in this industry have already adopted a 65 cent
minimum wage and this rate is expected to become general
in due course. Shipyard employment has improved mod­
erately in Maryland, and thus far has held about stable
in the rest of the District. The Navy has announced a
peacetime employment level of 9,500 for the Norfolk
Navy Yard, a figure 700 higher than was announced several
months ago. Present employment at the yard is around
13,000 which means a loss of about 3,500 jobs, probably
in the relatively near future.
Department store trade continued extremely active in
April. The daily average sales in April after seasonal ad­
justment and correction for the change in the Easter dates
were 6 per cent below March, but 31 per cent higher than
a year ago. In the first four months of the year depart­
ment store sales increased 19.6 per cent in the District,
with sales in Maryland up 19.2 per cent; District of
Columbia up 17.8 per cent; Virginia up 19.4 per cent;

West Virginia up 26.0 per cent; North Carolina up 24.3
per cent; and South Carolina up 11.9 per cent.
The rise in the volume of loans in the weekly reporting
banks which had persisted since last summer, peaked, at
least temporarily, in the first half of April and have since
receded moderately. The recession was mainly in loans
to others than brokers and dealers for purchasing or
carrying securities and this was no doubt occasioned by
the sharp rise in government bond prices. Commercial,
industrial, and agricultural loans little more than leveled
off while loans on real estate and other loans continued to
rise through May 15th. Other loans which are largely
consumer loans, have shown a persistent rise since last
summer despite the fact that few consumers’ durable goods
have been available for purchase in this period.
Total security holdings of the weekly reporting member
banks reached a peak of $1,857 million on March 6th. On
May 15th total holdings were $1,776 million or $81 million
lower, Government securities having declined $89 million
and other securities having risen $8 million. O f the $89
million decline in holdings of Government securities, bonds
accounted for $49 million; bills and certificates $13 million
each; and notes $14 million. The decline in bond holdings
was larger than a reasonable share of the issue redeemed
in March, and indicates some bond liquidation by these
banks.

BUSINESS IN D E X E S —F IF T H F E D E R A L R E S E R V E D IS T R IC T
Average Daily 1935-39=100
Seasonally Adjusted

Bank Debits ..........................................................
Bituminous Coal Production*............................
Building Contracts Awarded..............................
Building Permits Issued......................................
Cigarette Production ..........................................
Cotton Consumption* ..........................................
Department Store Sales......................................
Department Store Stocks..................................
Electric Power Production................................
Employment— Mfg. Industries* .......................
Furniture Orders..................................................
Furniture Shipments ..........................................
Furniture Unfilled Orders..................................
Furniture Sales— Retail ....................................
Life Insurance Sales............................................
Wholesale Trade—Four Lines..........................
Wholesale Trade— Drugs ..................................
Wholesale Trade— Dry Goods ........................
Wholesale Trade— Groceries ............................
Wholesale Trade— Hardware .........................
* Not seasonally adjusted.




Mar.
1946
254
154
328
304
245
139
294
206r
193
121
192
192
668
255
244
225
248
193
244
115

Feb.
1946
250
148
260
215
236
137
283
201 r
201
118r
279
199
618
218
221
239
255
199
261
119

Jan.
1946
228
142
171r
185
204
135
262
207
208
117r
224
244
488
229r
201
243
246
227
268
104

March
1946
216
140
82
45
152
144
250
185
209
136
141
158
539
175
152
182
217
186
190
104

% Change
Mar. 1946 from
Feb. 46
Mar. 45
+ 18
+ 2
+ 10
4- 4
+26
+300
+576
+41
+ 61
+ 4
— 3
+ 1
+ 4
+ 18
+ 2
+ 11
— 4
— 8
— 11
+ 3
— 31
+ 36
— 4
+ 22
+ 8
+ 24
+ 46
+17
+10
+ 61
— 6
+ 24
— 3
+ 14
— 3
+
4
— 7
+ 28
— 3
+ 11

3

MONTHLY REVIEW

Financing the Peanut Industry
in Virginia and North Carolina
During the 1932 crop year, at the bottom of the de­
pression, the farm sale o f peanuts contributed $5 million
to the income of the Fifth District and $12 million to that
of the United States. Gradual economic recovery plus
Federal action programs designed to aid agriculture tripled
peanuts’ contribution by 1939. The following five years
of war, however, really made them a big-money crop, for
by 1944 the income from peanut sales had risen to $48
million in this District and to $159 million in the entire
United States. Over this period, however, there was
little change in the importance of peanuts as a source of
farm income in the Fifth District. In 1932 peanuts pro­
vided 2.0 percent of the District’s cash farm income; by
1942 this proportion has risen to 2.9 percent. The war
period saw the normal food demands for peanuts increased
greatly and the production of peanut oil, normally of
minor importance, expanded to replace lost supplies of
foreign oils. Production increased, but prices increased
more rapidly, and the latter were responsible for most
of the great rise in income from this crop.
Before the war peanuts were the leading money crop
in several Tidewater counties of Virginia and North
Carolina, and made an important contribution to farm and
non-farm incomes in many Fifth District counties lying
south of the James River and east of the fall line. For
the most part, the handling and processing of this crop
takes place within the general production area, and to
this region the industry is of outstanding importance.
The farm production, factory processing and sale of
peanuts and peanut products furnishes employment for
thousands of persons, and the financing of the industry is
one of the most important single functions of all lending
agencies located within the peanut belt. It is the pur­
pose of this article to examine the patterns of financing
which prevailed in the peanut belt before the war, the
effects of the wartime situation on these patterns, and
the implications of current developments, as they concern
the future operations of credit agencies interested in this
industry.
It should be kept clearly in mind, in this connection,
that the financing o f the peanut industry is by no means
unique. In many of its aspects the financing of farm
production is the same for peanuts as for any other im­
portant and non-perishable cash crop raised in this gen­
eral section of the United States. In fact, farmers in
cash crop areas may finance, not just their major enter­
prise (whether it be peanuts, cotton, or tobacco) but
their entire farm operation by borrowing on the security
of their one dominant source of farm income. There­
fore, in the present instance, the examination will be
phrased in terms of peanuts, but with the implicit under­
standing that most of it could just as easily be stated in
terms of cotton or tobacco by little if any more than a
substitution of the one word for the other. Much the
same thing may be said of financing the industry beyond
the farm level. With few exceptions the analysis of the
peanut processing industry which follows could be ap­
plied to the handling and processing of almost any staple




agricultural product which can be graded, stored, and
offered as security for credit.
F in a n c in g

the

F arm

P r o d u c t io n

of

P eanuts

During the war the income of peanut producers was
so high and the supply of goods and services which they
normally purchased so small that they were much more
able than normal to finance their farm production out of
income or savings. Because of this they did not use their
accustomed credit facilities to the extent which charac­
terized the immediate prewar years or which, in all liklihood, will characterize the post-transition future. Prior
to the outbreak of war there were several different sources
of production credit available in the peanut belt, one or
more of which usually could take care of farm needs be­
yond the capital embodied in the farm itself. Not all
farmers could use every credit source— especially were
they restricted by their general standing and both habit
and circumstances made it unlikely that many particular
farmers would avail themselves of every source techni­
cally open to them. Although there were broad overlaps,
the groups of farmers and the credit institutions can be
matched roughly into three main divisions: 1) those
owners and tenants who were able to satisfy banking
standards of credit eligibility usually borrowed from either
commercial banks or Production Credit Associations;
2) the less attractive credit risks borrowed from the Farm
Security Administration, and many of this class were fur­
nished many necessities by time-merchants or landlords;
and 3) all the rest, including sharecroppers, usually de­
pended on advances of goods from time merchants or of
cash from their landlords or borrowed from the Federal
Emergency Crop and Feed Loan Program, although mem­
bers of every group might go to the latter in time of
drought or other similar emergency. There is wide vari­
ation throughout the peanut areas in the relative impor­
tance of these several lending agencies, but the commercial
banks play an integral part everywhere. Generally speak­
ing, landlord and time merchant credit were much more
important at an earlier period than they are at present,
and they show every sign of further decline. The three
Federal lending agencies were organized during the early
1930’s and have reached their present positions in rela­
tively few years.
Prior to the depression of the early 1930’s the bulk of
small owners and tenants probably were financed by time
merchants or by their landlords who generally made their
own financial arrangements through commercial banks.
Small owners and cash tenants who typically bought on
credit from the merchants goods used in living and produc­
tion, were charged “ time” prices (often well above the cash
price levels in other stores) as well as interest, gave the
merchant a lien on the crop, and applied part or all of
their cash income from the crop against the debt. Share
tenants and croppers received periodic “ furnish” either
from their landlord or from a designated merchant.
These advances, made in money and/or in goods, pro­
vided for much of their living and production expenses

4

MONTHLY REVIEW

until the crop could be sold. They usually carried inter­
est charges, were secured by a crop lien, and had a prior
claim after rent against the tenant’s share of the crop.
The relative shares of landlord and tenant were deter­
mined by the tenants’ contribution to the crop. When
the tenant was able to furnish the team and implements
in addition to his labor, his share of the crop might be as
high as three-fourths; but when he contributed little more
than his labor, the tenant’s share seldom exceeded onehalf. It was quite typical for both the landlord and the
merchant to finance their operations with bank credit.
Since his enterprise was predominantly a cash one, the
tenant or small owner normally was anxious to sell at the
earliest opportunity, even without pressure from his
creditors. Nevertheless, the conditions of his debt re­
duced his control over the time or method of the sale,
since the creditors’ control often extended to the desig­
nation of the buyer. In many instances the landlord or
merchant sold the tenant’s share for him, applied the pro­
ceeds against his debt, and returned any surplus to him.
Although still prevalent in many parts of the peanut
belt, these two methods of financing production are much
less important than formerly. Time merchants have lost
ground to the commercial banks, to the Federal lending
agencies, and to the rising practice of landlords to pay
cash furnish rather than to underwrite furnish accounts
with designated merchants. Then too there has been an
increasing tendency for tenants to borrow directly from
lending agencies, rather than to be financed by the landlord.
Furthermore, recent scarcities of labor have forced a
liberalization of tenure contracts, a condition which is
likely to endure for some while in the future.1
As generally practiced, it is quite unlikely that the ex­
tension o f production credit by landlords and merchants
is directly competitive with that of commercial banks, and
both creditor groups do, in their turn, borrow from banks
to finance their activities. In a similar way it can be said
that, although there are many exceptions, the activities of
the F.S.A. and the Crop and Feed Loan Program are rela­
tively non-competitive with bank lending. The bulk of
the clients of these two programs are tenants and small
owners who seldom can be considered as good bank credit
risks. However since both programs are specifically de­
signed to serve as means of relief and rehabilitation, these
clients may move “ up the ladder” and join or rejoin the
ranks of those to whom bank credit can be extended with
safety. The Crop and Feed Loans are made entirely for
purposes of production, are usually small, and are secured
by a crop lien. Following a drought or similar emergency
all classes o f farmers may take advantage of them, but
normally they are used by small operators .with small needs
and no other source of credit. F.S.A. production loans
are usually made on a larger scale. In addition to the
1 A lthough there is great sim ilarity between the methods o f financing pea­
nuts, cotton, and tobacco, there are m any differences (w hich result from
the different methods o f handling the crops) in the amounts and tim ing
o f credit extensions. F or exam ple, fertilizer is essential to the production
o f cotton and tobacco, but m ay not be needed to the same degree fo r pea­
nuts.
This introduces variability into the amounts o f fertilizer m oney
required at the b eginn in g o f the season. A gain, peanut p icking m ust be
paid fo r in cash, since p icking usually is a custom service, whether or not
the crop is sold imm ediately. The same cash expenses are seldom involved
in harvesting cotton and tobacco since harvest is alm ost entirely a labor
operation and since the labor is seldom hired fo r cash by the farm er, so
that the late extension o f credit is not so necessary in the latter tw o crops.
Ginning cotton m ay be a cash expense, but is usually financed by the sale
o f seed to the gin .




provision of credit for living and production expenses,
the client may be assisted in the purchase of land and
equipment, or otherwise aided in improving his basic
capital position. Close supervision is provided. The
funds necessary for one year’s project are deposited to a
joint account from which they can be withdrawn only
over the joint signatures of the farmer and the F.S.A.
Supervisor. Terms of repayment are arranged to fit the
specific pattern of farm enterprises, and interest rates are
low (5 percent per year on the unpaid balance).
Farm operators of good credit standing or who possess
ample security go either to the commercial bank or the
Production Credit Association for short-term credit, al­
though the latter may lend to many persons whom the
former might consider “ unbankable” . In either case the
security usually takes the form of chattel mortgages and
crop liens. P.C.A. interest rates are often slightly below
bank rates {A /2 percent against the banks’ 5 or 6 ), but
l
the addition of service charges not customary with bank
loans often raises them above the bank rates consider­
ing the services rendered.
Both institutions arrange
terms of repayment with the farm pattern of income
in mind, but the P.C.A. repayment schedule is more rigid
than those of many banks, although it may be more flexible
than those of others.
In the South commercial banks are becoming increas­
ingly aware of the credit needs of agriculture. Some few
banks now provide special credit services for farmers and
have employed trained agricultural workers to administer
the farm loan department and to provide borrowing
farmers with technical assistance and guidance in apply­
ing bank credit to farm problems. In many other banks
one or more officers try to keep in particularly close touch
with agricultural needs and developments in their respec­
tive communities. Although the banks providing such
special services as a full-time agricultural specialist are in
the minority, as yet, their numbers appear to be growing,
and interest in this field of potential bank action is in­
creasing.
„ Although by no means a model area in this respect, the
peanut belt seems to be well served in its farm credit
needs, perhaps better than many of the other areas of
specialized production in this District.
In addition to the provision of short-term working
capital, there are two other aspects of farm production
which should be mentioned; namely, the purchase of
farm machinery and the provisions for marketing lienencumbered peanuts. Although not current production
expenses because they usually extend over more than one
season, the costs of major productive equipment bear di­
rectly on production expenses. In the first place, the
provision of such machinery (through either direct pur­
chase or custom service) permits the substitution of
machine for man-labor and the lowering of production
costs. In the second place, unless the purchase of such
machinery is facilitated by some form of credit extension,
either a severe reduction of current funds available for
production will result or it will be impossible to acquire
the machine. With the exception of peanut pickers,
which may be custom-hired, the equipment necessary for
the production of peanuts is either general farming ma­
chinery of the types nationally distributed, or an inexpen­

MONTHLY REVIEW

sive modification of such machinery.2 When purchasing
the more expensive items the farmer may 1) pay cash,
2) borrow from an individual or from one of the abovementioned lending institutions, usually with a deed of
trust or a retention of title as security, or 3) use dealercredit, heretofore financed through one of the large com­
mercial credit organizations. The purchaser of special
equipment such as the picker, which usually is manufac­
tured in the peanut region, also may buy directly from the
manufacturer.
In many parts of the Virginia-Carolina belt the peanut
crop may be sold and delivered to the buyer directly from
the picker; often, however, the farmer will prefer to
store his crop on the farm, to have it sampled by several
buyers, and to receive their respective bids. Although
peanuts can be stored for some time without danger of
deterioration, there is always the danger of partial loss
through rat-damage or of total loss through fire. Fur­
thermore, when they are stored instead of sold immedi­
ately after picking, the farmer needs and often must
borrow additional money with which to pay the picker.
Since on many farms the peanuts represent the bulk of
his cash income for the season as well as the major secu­
rity for any credit previously extended him, the farmer
will desire and the creditor will insist that the crop be
insured for the period of farm storage. When the farm­
er's financial integrity is well known, the standard practice
is for him to take out a blanket policy simply by notifying
the insurance agent that he will store his peanuts from a
specified date. In case of loss, the physical volume of the
loss must be established by witnesses (usually the custompicker). If no loss occurs, the farmer subsequently noti­
fies the agent of the actual volume stored and the date (or
dates) on which they left the farm; costs of insurance are
thereupon computed and paid.

F i n a n c i n g t h e H ig h e r S ta g e s of t h e I n d u s t r y
Sometime before the beginning of the market season,
the cleaners and shellers who will buy most of the farm
crop and the processors who will further handle the
cleaned and shelled nuts estimate their working capital
needs for the forthcoming season and arrange to raise
any funds needed over and above those which they already
have. This determination is a complicated one, involving
as it does implicit forecasts of the probable market levels
of supply, demand, and price, as well as the company’s
own rate of capital turnover. On the basis of these esti­
mates the mills open lines of credit, arrange for specific
short-term loans, and/or otherwise attempt to insure the
immediate availability of ample current capital. In the
case of the larger firms it is usually impossible for any
one bank to furnish all the necessary credit, because of its
legal or self-imposed lending limits or because of its
assessment of the firm’s credit standing; so, in ordinary
practice, the local bank lends up to a limit and then offers
the rest to one or more correspondents. When this is
2 The harvesting o f peanuts is a somewhat unique operation, since the roots
and pegs m ust be raised from the ground and shaken free from dirt. This
may be done with a special peanut digger, a potato digger, or a plow which
has been m odified by replacing the m ouldboard with a slatted peanut a t­
tachm ent. Peanut pickers represent so large an investment and have so
great a capacity that few individual farm s can ju stify their purchase.
Instead, the bulk o f farm ers con tract with a custom picker to pick and bag
their crop fo r a small fee, usually about 40 cents per bag (the bags pro­
vided by the fa rm er). F or other operations the usual lines o f farm m achinery
are satisfactory.




5

done, the local bank usually undertakes to service all the
accounts, for which it receives some remuneration (around
one-half of one percent, as a rule). In other cases the
firm may distribute its business directly, borrowing from
several banks without clearing everything through any
one. In special cases, loans may be underwritten by a
banking sydnicate or handled by one bank with a guaran­
tee from the Reconstruction Finance Corporation.
Terms and conditions of these loans vary widely, since
they depend on many local conditions, the policies of in­
dividual banks, the credit standing of the borrowers, etc.
Some companies can borrow to the limit of their needs
without meeting any special conditions, others must sub­
mit statements, while still others must provide acceptable
security. The one universally accepted security in this
connection will be the nuts, themselves. Warehouse re­
ceipts, issued by a bonded public warehouse and showing
the exact grade of peanuts stored, are accepted through­
out the belt as security for loans up to 75 or 80 percent
of their market value. Interest rates vary, but usually
approximate those on other commercial paper of similar
risks and maturities. Loans made for specific purposes
seldom exceed 90 days maturity, but open lines of credit
must usually be closed out within a year, with many lim­
ited to 9 months.
As already noted the farm-to-market movement of the
peanut crop begins as soon as the nuts are picked. It has
been estimated that from 75 to 80 percent of the crop is
bought while still in the field by the cleaners and shellers,
who purchase in large part through part-time “ commission-men” . Since in many instances their connections
with the mill are essentially casual, buyers are not usually
empowered to draw against the mill’s bank account, but
pay farmers by means of “ memo-checks” , a variety of
sight draft drawn against the company and carrying a
complete record o f the particular transaction. Through
long familiarity, these memo-checks have gained almost
universal acceptance in the community and are handled
much as if they were bank checks in most transactions.
Within banking circles, however, they receive different
treatment. They are cleared through to the company’s
bank much like any other checks, but there they are col­
lected for presentation to the company just as if they
were sight drafts. The mill redeems them by a payment
(to the bank) which clears the entire transaction. Ordi­
narily the bank charges the mill a small fee (about one
cent per memo-check) for this service.
As soon as they are purchased, the peanuts move from
the farms into storage to await processing. The mill
stores them in its own warehouses, in public warehouses,
or in farm storage space which is rented from the seller.
In any event, they are insured immediately, and arrange­
ments are usually made for the issue of warehouse re­
ceipts which can serve as security for bank loans. Mills
customarily buy peanuts with their own funds and then
shift the cost of carrying farmers’ stock inventories to re­
ceipt-secured bank loans, thereby releasing their own
funds ior the continued purchase of nuts while retaining
an equity of about 20 to 25 percent.
Although the cleaners and shellers prefer to operate
continuously (on a one-shift basis) from the start of the
milling season until they have processed their entire
farmers’ stock holdings, they are actually operating on

6

MONTHLY REVIEW

advance orders much of the time, since the roasters and
other buyers of shelled goods usually order well in ad­
vance of their needs. When the credit standing of the
firm ordering “ shelled goods” is well known, the advance
order may be presented by the miller as security for fur­
ther bank credit, usually enough to provide plant oper­
ating capital. Furthermore, in many localities millers
use “ demand notes” as a means of raising working capital.
In many instances the shelled goods must be stored until
a specified delivery date or until they can be sold, and
this processed inventory requires further financing. A l­
though farmers' stock peanuts keep quite well in almost
any weather, the warm-weather storage of shelled goods
entails the risk of weevil infestation. This makes con­
ditions of shelled goods storage much more important to
a lender than is true in the case of farmers' stock peanuts.
Most banks will lend up to 75 or 80 per cent of the value
of shelled goods, if they are stored at or below a tempera­
ture of approximately 50 degrees F.
When peanuts finally move from the mill to the roaster,
peanut product manufacturer, candy-maker, or distributor
the sale is handled by means of a bill-of-lading sight draft,
which is acceptable for discount at any commercial bank.
The further processing and sale of peanuts and peanut
products follow the familiar pattern common to most
commodities.

T h e I m p l ic a t io n s of t h e W a r a n d t h e F u t u r e
During the war the demands for peanuts, as both a
food and oil crop, were so great that the Federal Gov­
ernment took unprecedented steps in fostering the ex­
pansion of and regulating the industry. The price of
farmers' stock nuts were fixed by the establishment of a
schedule of prices to be paid by the Commodity Credit
Corporation which was designated as the sole buyer of
farmers' stock peanuts. The uses to which the several
grades of peanuts could be put and the prices to be
paid were so closely circumscribed, at almost every step
in the production, processing, and distribution of peanuts
and peanut products that lenders were assured an absence
of price instability. Obviously, such far-reaching con­
trols would have profound consequences in the financing
of the industry, and they created a situation completely
unlike that of any normal period.
In the financing of peanut production the war situation
had a dual effect; first, fluctuations of the farm price were
eliminated, simplifying the work of the credit agencies
and leaving few risk elements in the picture except those
involving natural conditions and labor shortages; and,
second, generally higher farm incomes in conjunction with
shortages of many things which farmers normally would
have purchased left producers in a much more liquid
financial position, which both reduced their needs for
credit and made them better credit risks. Thus the
net effect o f the war was to reduce the absolute needs
for credit by farmers while increasing the confidence with
which lenders could lend and farmers could borrow. For
the transitional period of mandatory price support3 the
3 B y law, the price o f edible grades o f peanuts will be supported at 90 per­
cent o f parity fo r tw o fu ll calendar years follow in g the official declaration
o f the end o f hostilities. I f the declaration comes before the end o f 1946,
this means that the price o f peanuts fo r food w ill n ot be allow ed to fa ll
m uch below present levels, in all probability, at least until the close o f




prices to be paid for edible peanuts will surely remain
higher than their prewar level and will tend to continue
this favorable situation. Therefore it will be thoroughly
worth while for bankers in the peanut producing belt to
consider appropriate means of increasing desirable short­
term farm credit business: Peanut producers will have
higher than prewar incomes from their crop and, conse­
quently, will be better able to repay production loans. At
the same time, the gradual return to markets of goods
which farmers have desired but not found available will
tend to prevent what might otherwise be a fall in farm
dependence on credit for their production capital.
In the higher stages of the industry, as well as on the
farms, the war profoundly altered the credit situation.
Since C. C. C. was the sole purchaser of farm peanuts,
and since this agency acted through the existing market
institutions, the resources of the Federal Government in
effect underwrote all credit extended to peanut millers and
manufacturers. The full market value of farmers' stock
nuts and shelled goods was known well in advance; and
the check-off system, which assured the satisfaction of all
prior liens on peanut inventories, made it perfectly safe
to lend to the full value of peanut security. The only
precautions necessary for the lending agencies were that
they insist on adequate insurance coverage and that they
see to it that shelled goods were given cold storage in
warm weather. For all intent and purpose the wartime
extension of credit to the peanut industry was completely
free from many of the normal risks of business. A l­
though it must be remembered that the sampling and grad­
ing of peanuts is of such uncertainty as to make a con­
siderable degree of risk inevitable.
It goes without saying that the removal of the above
controls and guarantees will re-introduce many risk ele­
ments into the financing of off-farm stages of peanut
processing and distribution, but the situation is not likely
to return to prewar for at least a few years. The banks
and other financial institutions which have become accus­
tomed to the almost automatic extension of credit on
peanut security must return to their old habits of carefully
scrutinizing every application for credit, of trying to an­
ticipate the behavior of the market, and of insisting upon
adequate security. However, this will be easier. Con­
tinued Governmental support of farm peanut prices will
not only simplify the extension of credit to farmers, but
it will introduce a previously absent degree of resistance
to downward fluctuations on the part of the value of
farmers’ stock inventories and, probably, o f shelled goods
inventories. Aside from the controls inherent in the
price support program, it appears that most (and perhaps
all) wartime restrictions on the autonomy of the industry
will be removed during or soon after the 1946 crop season.
Thus it seems likely that, although the extension of credit
to the peanut industry will be somewhat safer than during
the prewar past, the recent period of almost automatic,
risk-free lending definitely has closed.
the crop year 1948-49. The prices o f oil peanuts, which are o f negligible
im portance to producers in V irgin ia and N orth Carolina, but o f m ore to
those in South Carolina, could fa ll under this support program probably to
less than h a lf the present level.

MONTHLY REVIEW

7

F E D E R A L R ESE RV E B A N K OF RICHMOND

DEBITS TO IN D IV ID U A L A CC OU N TS

(A ll Figures in Thousands)

(000 om itted)

May 15
1946
ITEMS
Total Gold R eserves.............................. .$ 909,798
19,865
Other Reserves ....................................
929,663
Total Reserves .................................
3,915
Bills Discounted ..................................
33
Industrial A dvances ...........................
Gov. Securities, T o ta l.........................
1,438,194
Bonds ..................................................
56,661
109,074
Notes ..................................................
397,029
Certificates ........................................
875,430
Bills ......................................................
1,442,142
Total Bills & Securities.....................
184,959
U ncollected Items ................................
41,564
2,598,328
T otal Assets ......................................

Chg. in A m t. From
4-17-46
5-16-45
— 27,136
— 9,313
+
6,831
— 1,457
— 20,305
— 10,770
— 12,739
— 10,290
—
61
—
5
+ 185,713
+ 14,398
— 14,879
+
26
+ 45,059
+ 17,292
+ 42,668
+
132
— 3,052
+ 112,865
+ 175,362
+ 2,654
+ 44,756
— 24,389
+ 28,891
— 3,429
— 35,934
+ 228,704

Fed. Res. Notes in C ir......................... $1,650,012
761,750
Deposits, T otal ...................................... , .
694,302
Members’ Reserves .........................
33,000
U . S. Treas. Gen. A cct....................
30,399
4,049
Other Deposits .................................
155,275
D efg. A vailability Item s.....................
597
Other Liabilities .................................
30,694
Capital A ccounts .................................
Total Liabilities ................................ 2,598,328

— 15,694
— 17,655
— 24,228
+ 6,692
— 1,057
+
938
— 3,022
+
38
+
399
— 35,934

+ 130,172
+ 60,510
+ 47,640
+ 32,619
— 15,726
—
4,023
+ 31,435
+
34
+
6,553
+ 228,704

41 R E PO R TIN G M EM BER B A N K S — 5th D ISTRIC T
(A ll Figures fn Thousands)
May 15
1946
ITEMS
Total Loans ......................................
Bus. & A gri. L o a n s...................
1831,171
55,298
Real Estate L oa n s.....................
165,955
A ll Other L oa n s......................... , ,
Total Security H old in gs...............
, . 1,776,217
U. S. Treasury Bills ................. . . ,
53,042
423,887
U. S. Treasury Certificates
187,184
U. S. Treasury Notes ...............
U. S. Gov. Bonds ....................... . . , , 1,028,479
146
Obligations Gov. Guaranteed. .
83,479
Other Bonds, Stocks & S ec., . .
131,665
Cash Items in Process o f C o l.. . .
141,150*
Due from B an ks.............................
37,228
C urrency & C oin ..............................
345,031
Reserve with F. R. B a n k .............
77,578
Other Assets ....................................
$2,913,293

Chg. in A m t. From
4-17-46
5-16-45
+ 123,108
— 12,340
+ 60,106
— 2,225
+
9,843
+ 2,261
+ 53,159
— 12,376
+ 175,568
— 7,736
— 30,594
+ 11,327
+ 101,784
— 9,565
— 61,590
— 3,068
+ 151,785
— 13,717
—
9,144
—
3
+ 23,327
+ 7,290
+ 20,880
—
147
—
8,854
— 9,430
+
393
—
449
— 8,093
+ 19,034
—
861
+
6,244
+ 336,373
— 39,056

$2,292,441
Total Demand D eposits.................
1,386,940
Deposits o f Individuals .............
388,375
Deposits o f U. S. Gov............
96,956
Deposits o f State & Local Gov.
385,080*
Deposits o f Banks ..................... , . ,
35,093
Certified & Officers’ Checks. . .
378,155
Total Tim e D eposits.......................
363,376
Deposits o f Individuals.............
14,779
Other Tim e D eposits.................
2,000
Liabilities fo r B orrow ed M oney. ___
98,747
A ll Other L iabilities.....................
141,947
Capital A ccounts ............................
T otal Liabilities .............................. . . $2,913,293

— 39,170
+ 42,366
— 56,710
—
710
— 16,856
— 7,260
+ 4,317
+ 3,871
+
426
— 9,875
+ 4,987
+
685
— 39,056

+ 285,053
+ 98,143
+ 184,904
+
3,876
— 16,310
+ 14,440
+ 57,150
+ 56,023
+
1,127
— 12,000
— 11,359
+ 17,529
+ 336,373

D istrict o f Columbia
W ashington ...........
M aryland
Baltim ore ...............
Cumberland ...........
Frederick ...............
H agerstow n ...........
N orth Carolina
A sheville ...............
Charlotte ...............
Durham .................
Greensboro .............
Kinston .................
Raleigh ...................
W ilm ington ...........
W ilson ...................
W inston-Salem . . .
South Carolina
Charleston .............
Columbia ...............
Greenville .............
Spartanburg .........
V irginia
Charlottesville . . .
Danville .................
Lynchburg .............
N ew port News . . .
N orfolk ...................
Portsm outh ...........
R ichm ond ..............
R oanoke .................
West V irginia
Bluefiela
...............
Charleston ..............
Clarksburg .............
H untington ...........
Parkersburg ..........

609,927

+ 22

$ 2,407,356

+ 14

808,166
18,242
14,419
21,000

+ 8
+ 23
+ 21
+ 24

3,180,612
70,492
55,806
81,081

+ 5
+ 27
+ 17
+ 22

35,316
164,661
78,542
50,956
10,949
77,779
31,720
10,809
82,371

.$

% Change
from
A p r. 1945

+
+
+
+
+
+
—
+
+

48
18
41
48
64
70
9
26
47

143,342
612,467
313,769
201,014
40,657
277,952
127,992
42,536
336,839

+ 32
<
+ 14
+ 34
+ 28
+ 31
+ 30
— 12
+ 9
+ 33

.+ 2 0
+ 38
+ 42
+ 33

192,738
262,803
206,485
120,481

+
+
+
+
+
+
+
—
+

49,803
69,024
52,223
28,999

4 Mos.
1946

% Change
from
4 Mos. ’ 45

14
27
29
33

21,913
20,021
29,218
21,081
128,169
16,433
343,446
61,404

+
+
+
—
+
—
+
+

17
45
43
3
15
2
14
47

89,874
80,407
111,862
91,177
526,679
66,890
1,354,647
229,597

26,677
96,393
21,859
40,525
19,278

+
+
+
+
+

15
20
3'7
12
5

108,504
387,316
87,341
159,765
75,490

+ 14
+ 19
+ 35
+ 7
+ 3

+ 19

$12,043,971

+ 12

$ 3,061,323

17
20
31
1
10
0
+ 4
+ 32

COTTON C O N SU M PT IO N A N D ON H A N D — B A LE S
A p ril
A p ril
1946
1945
Fifth D istrict States:
Cotton consumed .................
386,633
377,564
Cotton G rowing S tates:
Cotton consumed .................
711,983
678,331
Cotton on hand A p ril 30 in
consum ing establishments 2,028,302 1,872,415
7,461,741 10,941,763
storage and com presses. .
United S tates:
813,732
Cotton consumed .................
769,209
Cotton on hand A pril 30 in
consum ing establishments 2,387,836 2,188,220
storage and com presses. . 7,605,701 11,025,486
Spindles active, U. S............ 21,972,784 22,158,674

A ugust 1 to A p ril 30
1946
1945
3,262,487

3,599,829

5,975,864

6,432,356

6,771,882

7,278,600

COTTON CO N SU M PTIO N — FIFTH D ISTRIC T
M ONTH S
A p ril 1946 .....................
March 1946 .....................
A p ril 1945 .....................
4 Months 1946...............
4 Months 1945...............

♦Net figures, reciprocal balances being eliminated.

A pril
1946

In Bales
No. Carolina So.
213,104
211,878
203,109
829,934
864,217

Carolina V irgin ia
156,892
16,637
158,585
17,183
156,710
17,745
623,736
66,381
659,463
78,025

D istrict
388,633
387,646
377,564
1,519,551
1,601,705

C O M M ER C IA L F A IL U R E S
M ONTHS
A pril 1946 ...................
March 1946 ...................
A pril 1945 ...................
4 Months 1946.............
4 Months 1945.............

Num ber Failures
D istrict U. S.
1

S ou rce: Dun & Bradstreet




81
1
2
8
9

Total Liabilities
D istrict
U. S.
$

86
90
339
321

7,000
25,000
65,000
$ 85,000
1,259,000

$ 3,785,000
4,421,000
980,000
$15,561,000
12,300,000

DEPOSITS

Total Deposits .........

IN M U T U A L SA V IN G S
8 B altim ore Banks
A p r. 30, 1946
$361,125,325

BANKS

Mar. 31, 1946
$356,755,072

A pr. 30, 1945
$312,239,112

MONTHLY REVIEW

8

BU ILD IN G P E R M IT FIG U R E S

W H O L E S A L E T R A D E , 239 FIRM S

Total Valuation
A p ril 1945
A p ril 1946
M aryland
B altimore

..........................................$

.................
.................
H agerstown ................................... .................
Salisbury ...........................................................
V irginia
Danville

......................... .................
..........
......................... .................

$ 1,005,190
900
8,515
29,349
29,834

4,429,760
65,975
30,382
99,925
104,943

.................
.................
.................
.................

336,070
350,558
373,115
79,150
44,345
1,404,439
499,066

20,944
11,000
340,610
2,955
38,880
1,183,422
63,869

W est V irginia
Charleston ...................................... .................
Clarksburg
H untington

193,713
104,865
235,935

92,200
4,185
127,540

58,964
540,998
234,875
214,794
138,490
267,310
143,850
60,765
176,424

18,843
128,216
45,665
128,770
36,208
1,185
16,500
12,953
247,156

.................
.................

..........
..........

51,409
104,067
148,310
52,591

263,991
29,395
23,450
47,780

..........

4,731,207

2,695,403

.................$15,276,295
$66,737,308

$ 6,654,908
$15,760,184

N orfolk
Petersburg ..................... ’...............
Portsmouth ....................................
Richm ond ......................................
Roanoke ..........................................

..................... ..........
..................... ..........

North Carolina

. ...............
..........

.......................................... .................
.................
.................
.................
Rocky Mount ................................ .................
.................
.................

Durham

South Carolina

D istrict o f Columbia

..........

C O N STRU CTIO N C O N TR A C TS A W A R D E D
STA TE S

M arch
1946

3 Mos. 1946

+ 875
+ 81
+ 109
+ 310
+ 261
+ 1,101
+ 300

Maryland .............$29,270,000
Dist. o f Columbia 6,511,000
V irgin ia ............... 17,866,000
W est V irginia . . . 6,221,000
N o. Carolina . . . . 16,583,000
So. Carolina . . . . 12,707,000
F ifth D istrict. .$89,158,000

% Chg. from
3 Mos. ’ 45

$ 51,697,000
14,082,000
39,962,000
15,495,000
34,519,000
23,451,000
$179,206,000

% Chg. from
M arch 1945

+
+
+
+
+
+
+

366
52
74
408
231
568
197

S ou rce: F. W . Dodge Corp.

R AYON YA R N DATA
A pr. 1946

Mar. 1946

A pr. 1945

Rayon Yarn Shipments, Lbs........
Staple Fiber Shipments, L b s .. . .

57.500.000
14.800.000

58.300.000
16.800.000

48.800.000
13.600.000

Rayon Yarn Stocks, Lbs.................
Staple Fiber Stocks, Lbs...............

9.200.000
2.200.000

9.200.000
1.900.000

6,100,000
2,700,000

S ource: R ayon Organon.

N et Sales
Stock
R atio A p ril
A p ril 1946
A pr. 30, 1946
collections
com pared with com pared with
to a cct’s
A p ril
Mar. A pr. 30 Mar. 31 outstand’g
1945
1946
1945
1946
A p ril 1

LIN ES
Auto Supplies (1 4)* ...............
Drugs & Sundries ( 6 ) * ...........
Dry Goods ( 7 ) * ..........................
E lectrical Goods (1 4 )* .........
Groceries (8 3)* .......................
H ardware (1 6)* .......................
Industrial Supplies ( 5 ) * .........
Paper & Products ( 6 ) * ...........
T obacco & P roducts (9 ) * . . . .
Miscellaneous (7 9 )* ...............
D istrict A verage ( 2 3 9 ) * ...

+
+
+
+
+
+
+
+
+
+
+

89
16
52
48
28
45
5
25
37
17
28

+
+
—
+
—
—
—
—
+
+
+

12
6
7
15
2
2
8
4
2
6
2

+ 20

— 2

+
+
+
+
+

46
40
13
34
22

+ 22
+ 5
+ 1
+ 3
— 9

+ 64
+ 8
+ 21

+ *8
+ 1
+ 3

94
128
90
97
176
109
112
98
150
110
121

S ource: Departm ent o f Commerce
*Num ber o f rep ortin g firms.

D E P A R T M E N T STO R E T R A D E
Richm ond
Percentage
+ 57
P ercentage
+ 24
Percentage
+ 13
Percentage
+ 40
Percentage
+ 46
Percentage
52
P ercentage
27

B altim ore
W ashington
Other Cities
D istrict
change in A p ril 1946 sales, com pared with sales in A p r. 1945:
+51
+44
+58
+50
change in 4 mos. sales 1946, com pared with 4 mos. 1945:
+16
+16
+21
+18
chg. in stocks on A p r. 30, ’ 46, com pared with A pr. 30, ’ 45:
+ 5
+ 7
+19
+ 8
change in outstanding orders A p r. 30, ’ 46 from A p r. 30 ’ 45:
+14
+18
+39
+21
chg. in receivables A pr. 30, ’ 46, from those on A pr. 30, ’ 45:
+37
+25
+32
+33
o f current receivables as o f A p ril 1 collected in A p r il:
55
54
61
55
o f instalm ent receivables as o f A p ril 1 collected in A p r il:
33
27
36
30

M aryland Dist. o f Col. V irgin ia W . V irgin ia N o. Carolina So. Carolina
Percentage change in A pr. 1946 sales from A pr. 1945 sales, by S tates:
+ 52
+44
+52
+61
+60
+39
P ercentage change in 4 m onths sales 1946 from 4 months sales 1945:
+ 19
+16
+19
+25
+24
+11

R E T A IL F U R N IT U R E SALE S

STATES
M aryland (5 )* .........................
Dist. o f Columbia ( 7 ) * ..........
V irgin ia (2 3 )* .........................
W est V irgin ia ( 1 0 ) * ...............
N orth Carolina (16) ...............
South Carolina (1 4)* ...........
F ifth D istrict (7 5 )* .............
Individual Cities
Baltimore, Md. (5 )* ...............
W ashington, D. C. ( 7 ) * ...........
Lynchburg, V a. ( 3 ) * .................
R ichm ond, V a. ( 7 ) * .................
Charleston, W . V a. (3 )* . . ,
Charlotte, N. C. ( 4 ) * .............
Columbia, S. C. ( 4 ) * ...............
♦Number o f reporting stores

Percentage changes in A pr. and 4 mos. 1946
com pared with com pared with
A p ril 1945
4 Mos. 1945
+ 70
+ 43
+ 68
+ 59
+ 78
+ 58
+ 39
+ 56
+ 65
+ 46
+ 65
+ 47
+ 67
+ 51
+
+
+
+
+
+
+

70
68
90
89
64
83
76

+
+
+
+
+
+
+

43
59
75
68
69
65
53

SOFT C O A L P R O D U C T IO N IN TH O U SA N D S OF TONS
TOBACCO M A N U FA C TU R IN G
A p ril
1946
S m oking & C hew ing tobacco
(Thousands o f l b s .) ...........
16,573
Cigarettes (Thousands) ...25,451,503
Cigars (Thousands) .............
484,318
Snuff (Thousands o f l b s .) . .
3,450




% Change
from
A p r. 1945
—
+
+
—

23
49
25
7

4 Mos.
1946
63,311
100,715,225
1,888,413
13,810

% Change
from
4 Mos. ’ 45
—
+
+
—

29
39
20
10

R EG ION S
W est V i r g i n i a ........

Fifth D istrict . .
United States . ..
% in D i s t r ic t ....

A p ril
1946

3,210

A p ril
%
1945 Change
12,627
1,345
133
14,105
43,3'60
— 93
32.5

4 Mos.
1946
41,312
5,083
626
47,021
163,800
28.7

4 Mos.
1945
53,337
6,309
573
60,219
196,955
30.6

%
Chg.
— 23
— 19
+ 9
— 22
— 17


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102